Government announces response to Cooper Review

There has been broad acceptance of the Federal Government's plans for making superannuation a better deal for workers and cheaper for employers.

Transcript

TICKY FULLERTON, PRESENTER: There's been broad acceptance of the Federal Government's plans for making superannuation a better deal for workers and cheaper for employers.

MySuper and SuperStream grew out of the Cooper review of the superannuation system, and after more than a year of consideration the Government has finally revealed how it will implement them.

Andrew Robertson reports.

ANDREW ROBERTSON, REPORTER: Australians have $1.4 trillion in retirement savings. Most of it is held in employer-nominated funds in a system the Cooper review concluded was far too expensive, as commissions and other charges eat away at retirement incomes.

BILL SHORTEN, MINISTER FOR FINANCIAL SERVICES & SUPERANNUATION: Adequate retirement for people who've worked hard their whole life is one of the - is the grand final for politics for the Labor Party.

ANDREW ROBERTSON: The Government is hoping to win that grand final through its so-called Stronger Super reforms.

The key element is the development of low-cost default superannuation funds which will be labelled MySuper.

DAVID WHITELEY, CEO, INDUSTRY SUPER NETWORK: What these MySuper proposals do is, with effect from 2013, all future contributions will be commission-free and with effect from 2017 the intention is that commissions will be completely removed from the compulsory superannuation system.

ANDREW ROBERTSON: The Cooper review had wanted MySuper funds to charge a standard price to all workers, but the Government has agreed to variable pricing.

JOHN BROGDEN, CEO, FINANCIAL SERVICES COUNCIL: Bigger workplace brings obviously more people into the fund, more funds under management, but better administrative processes. So, for instance, only one pay office for 30,000 staff is going to be cheaper than a number of pay officers for a series of staff.

ANDREW ROBERTSON: Which means the downside for people in smaller workplaces is they'll miss out on any fee reductions, which will impact their retirement incomes.

JOHN BROGDEN: It means your fees could well be higher, and that is just reflective of the workplace that you're in. So, yes, that's a fair point to make.

ANDREW ROBERTSON: Australia has more than 30 million superannuation accounts for 11 million workers. In a bid to reduce fees and boost retirement incomes, from 2014, inactive funds with less than $10,000 in them will automatically be rolled into an active fund.

But the Industry Super Network's David Whiteley believes the threshold should be abolished.

DAVID WHITELEY: The reality is that whether someone's got $10,000 or $11,000 or maybe even $20,000 in their superannuation does not - is not necessarily a factor in whether they're particularly engaged in their super.

ANDREW ROBERTSON: Another key part of the reforms is known as SuperStream, which is designed to slash costs by modernising and streamlining back-office functions.

Updating IT systems won't be cheap, though, and the Financial Services Council's John Brogden believes smaller super funds may get gobbled up by bigger ones. But, he says, workers will benefit.

JOHN BROGDEN: Their pencils will get sharper and sharper because very big funds will be able to drive very good bargains on investment management fees and they'll come back to consumers.

ANDREW ROBERTSON: And employers too are confident they'll also benefit from modernised back-office functions which will make it easier to engage with super funds.

DICK GROZIER, DIRECTOR, INDUSTRIAL RELATIONS, NSW BUSINESS CHAMBER: Employers also see superannuation as one of their more complicated areas of compliance, and a lot of the sorts of changes which were foreshadowed in Stronger Super should go a long way to reducing that burden.

ANDREW ROBERTSON: Bill Shorten says legislation for the Stronger Super reforms will be introduced into Parliament over the next few months.